the Juice weekly vol. 1

EDITOR'S NOTE

Volume 1 of the Juice weekly is here on the soft launch of market-juice.

In this weekly note, we shall be covering all the Juice in charts, banters, news and anything noteworthy in the markets.
Do give us your feedback to help us improve this note to you.
Have a great weekend!


FEATURE

Chart of the week

In our first edition, we shall look at one of the leading benchmark indices of the world, the S&P 500

S&P Daily Candlesticks

Click to expand

S&P Weekly Candlesticks

Click to expand

We shall do our charting covering the following factors:
Candles: Dark candle momentum may be set to continue both on the Daily and Weekly
Moving Averages: MAs on the Daily have since give a -ve cross while on the Weekly there seems to be hope for another rebound
Oscillators (RSI and Stochastics): Daily oscillators are oversold while Weekly
Ichimoku Overlay: Price action is trading under the could, -ve signs both on the Daily and Weekly. Chikou Span has had a negative cross which may be set to continue as well

Some basics on the Ichimoku Overlay:
Tenkan Sen (Similar to Shorter term moving average)
Kijun Sen (Similar to Longer term moving average)
Ichimoku cloud (Support and resistance indicator)
Chikou Span (Lagging indicator)

Verdict: Market could have more weakness in the coming week while some strength remains in the coming month. As such, the probability of a large crash moving forward is relatively low while there exists a probability of a short-term bounce in the coming month. However, the strength of bounce may not be strong.

Do note that the above is just technical analysis. A more comprehensive analysis will require fundamental valuation of index components and also the analysis of market behaviour (based on psychology instead of charts). And this is beyond the scope of this section.


Banter
These points are excerpts from a coffee shop discussion with an interest-rate swap dealer:

1) Banks are increasing lending rates and tightening credit limits. They seem to be reducing risk
2) This is not normal as banks would want to lend more if interest rates can be increased. They will make more money getting more interest on their lending. Reducing credit limits are contradicting
3) Highly leveraged individuals or businesses may be more badly affected

Comment: A rather bleak and depressing discussion. The effects of which may only be felt towards the middle of 2012. As for now, let's enjoy the ride in the markets while keeping tabs to conserve for the future

Interim update of the week

Good day, good people!

A little intro, this post to kick start the action and bring a little life at this clean and green site.
Now let's have our market action updates.

Market Action
After 3 trading days as I last wrote about the retracement matter, we see that markets have plunged tremendously, exceeding our expectations of lows. This is partially because the turning points were a little lower than expected. Nonetheless, the expected has happened. We shall now brace for what is to come.

As this is being reported, the STI is at a low of 2886.56, the HSI at 22285.00 and Nikkei at 13159.45 All 3 major Asian indices have fallen considerably since Thursday. On the other hand, Wall street is rebounding from its low.

Insights and Opinion
Moving forward, we have our visual illustrations and opinions on where things are heading.



Starting with the STI, here we see a familiar candlestick. Not that this candlestick is a very special one and that its presence signifies a reversal about to happen, this candlestick after a gap down shows that a reversal is likely to happen. Throughout Tuesday, the market opened much lower and crept up slowly and quite surely, implying short term strength. This
together with our familiar candle is good sign.



On to the HSI. The latest candle is obviously a hammer. Although it is a black one, its presence in a strong bear market is a reversal sign.

Wrapping up, these signs are in line with previous estimates of retracement of the markets and projected short term up trend.

Say tuned for the next update coming soon, within the week, when we confirm this short term up trend and analyse the coming downturn.

Turning Point?

Market Action
Both the STI and HSI shed a bit of yesterday's gains (0.04% and 0.20% respectively) despite Wall Streets gains. The Nikkei is up 2.18% to 13603.31. The Singapore market was supported by gains in the banks, SGX as well as Citydev while other counters closed under the water.

Insights and Opinion
Following yesterday's Ichimoku charts, we have 2 charts on near term support and resistance.


This first chart shows the STI candlesticks. The top and bottom horizontal dotted lines are the near term support and resistance lines while the middle dotted line cuts the level at which a slight reversal is possible. The proportion here exhibits what can be believed to be, sacred geometry. In this case, it is just 1:2, where 1 and 2 are Fibonacci numbers. As the market is currently exhibiting a range phenonmenon, I have assumed the possible length of time this cycle will last.


This second chart shows the HSI candlesticks. The lines drawn here have the same meaning. Notice that the patterns for the HSI are similar to that of the STI. Considering the current macroeconomic climate, it is safe to assume that coupling of the markets shall persist for now.

The circled parts in both graphs give me a basis to believe that a short turning point will occur.

Once again, click on the charts to have them enlarged.

一目均衡表

Announcements
The inconsistent posting is regretted. Be sure to check this space every week. I will update it once a week from now on. No point updating everyday as I am not a reporter.

Market Action
Notice I dropped the "Today". I suppose it is more useful to share a boarder view.

The market seems bullish in the short term. However, near term correction is highly possible. Regional markets like the Nikkei and Hang Seng have had strong gains since last week. As of today, the STI gained 88.32 points to finish at 2978.32. In the region, the HSI gained a whooping 607.07 points to reach 23134.55 and the Nikkei also climbed 127.97 points to 13312.93.

Insights and Opinion
I have had comments that my insights needed to be a bit more "insightful". As I endeavour to upgrade the content on this site, here is the first invention to roll out. Introducing, Mao's Ichimoku.

The 一目均衡表 (Ichimoku Kinko Hyo) was invented in 1935 by a Japanese writer named 細田悟一氏. It is technical indicator used in technical analysis. Its full definition can be found at Investopedia.

For the purpose of my research, I have customised the Ichimoku for my analysis. I have attached 2 diagrams below to illustrate my findings using Mao's Ichimoku. The customised Ichimoku here has had its variables changed even though the lines are used for the same purpose. Mao's Ichimoku is used best to gauge quarterly (3-month) outlook. Click on the pictures to enlarge them.



Here we have the STI Candlestick chart with Mao's Ichimoku overlay. The Blue line is the Tenkan Sen, Red line is the Kijun Sen. These work like moving averages over a period of 8 and 21 days respectively. The Baby Blue line and Pink line are the Senkou Span A and Span B respectively. The area between the lines are the Ichimoku cloud which is a gauge for support and resistance.

From this chart, the STI is likely to retrace when it reaches 3030 to about 2940 levels. The retracement process will take 2 to 3 trading days. After this, it is likely to go all the way to a resistance at 3150. 3150 is the part just above the cloud. Due to the current state of the economic fundamentals, it is not likely to see the market break very much above the cloud. Technically speaking from the trend in the chart, it is unlikely that it will not reach for the resistance level in the short term.



Now for the HSI. The HSI is likely to retrace when it reaches 23300 to about 22400 levels. The retracement process is likely to happen within the next 2 trading days and will take 2 to 3 trading days to complete. After this, it is likely to go all the way to a resistance at 24500. Again, 24500 is the part just above the cloud. Economic fundamentals and technical indicators that apply to the STI are applicable here as well.

Hope you enjoyed this post and found the information useful. Feel free to comment :)

Rebound

Announcements:
Posts from now on shall follow a specific format. This shall give readers a better and more systematic view of daily insights. And YES! Daily posting shall resume since there is something new in the market everyday.

Today's Market Action:
The local market surged 41.58 points today to close at 2934.12. CityDev led the Top Gainers, up $0.400 or 3.7% together with other index weights. Call Warrants (CW) dominated the Top % Gainers. Gold 10US$ led the Top Losers falling $1.52 or 1.6%. Standing with it are Put Warrants (PW). Top % Losers include blue-chip Calls and index Puts. The STI seems to have moved closely in tandem with the HSI and the N225 for today.



My Insights and Opinions:
The market has kept within my estimated band of 2900 +/- 50, hitting a low of 2862.27 on the 3rd of July. The current uptrend seems strong but a little too strong to be sustainable in the short term. Relative Strength Index (RSI)* from the 3-month chart shows that the market is moving into "range" territory between 40% to 60%. That can be a good sign in times of economic weakness. A future breakout may indicate a start of a recovery.



CW in the Gainers with PW in the Losers are a clear sign of a very short term uptrend. However, due to the implied volatility that CW and PW are subjected to, this clearly shows the volatility and corresponding uncertainty of the current market.

Considering the above points, my view on seizing opportunities still hold for a longer term outlook. However, current prices are unattractive in the short term.


*RSI = 100 - 100/(1 + RS) where, RS = Average of x days' up closes / Average of x days' down closes

On Moving Averages

The market closed 1% higher after a gain of 31.00 points after a higher gain at the beginning of the day. Gainer beat losers 348:260. An analysis of the 3-month chart gives very near-term promise of a short ride upwards if tomorrow ends finishes in a 3rd white knight.

Today's topic is on Moving Averages. These values are obtained by taking the average prices of the past days. A more detailed definition and explanation is given here.

I shall provide the value-add by sharing my knowledge about Moving Averages. When reading charts, some traders chose to use Fibonacci numbers as they represent sacred geometry. Fibonacci numbers that can typically be used are: 5, 8, 13, 21, 34, 55, 84 depending on your investment horizon. Notice that 5 days = 5 trading days and not 5 calendar days. Hence, 5 trading days cover a week.

It is useful to compare a shorter term with a longer term. My choice, from when I learnt this is to use MA8 and MA55. The former in measures slightly more than a calendar week and the other, close to 3 calendar months. The rule-of-thumb here is to BUY at an intersection of MA8 and MA55. However, in my opinion, it matters what direction the lines are heading too. Below is a summary of the characteristics.

	MA8	MA55	BUY?
Direction	Up	Up	Yes
	Down	Up	Yes
	Down	Up	No
	Down	Down	No

The reason for this is that if MA55 is heading down, the general trend tends to be a bit bearish. So in order to cut risk, prudence has to be exercised before a BUY. Conversely, In a bullish market, even though general optimism is there, prudence is also to be exercised to reduce the chance of irrational actions.

Moving Averages is possibly the simplest technique in technical analysis. It is beneficial take them into consideration when investing.

Trading with Candlesticks

Another day of market info and knowledge sharing!

I have decided to add some fun facts to complement each day's analysis. This is to spice things up. I did like to differentiate myself from the regular columnists in the newspapers.

Before I begin my column on Candlesticks, Friday's market bounced back rather well. The STI closed up 62.27 points to finish at 3126.87 and closing in on what it lost in the past 2 days. This is either a clear sign of a range market or a show of regained strength in a very early part of a new market cycle. We shall continue tracking the performance and sentiments of the market to know for sure. My outlook stands at "Range" in the short-term for now.

Now for Candlesticks.
I have mentioned Candlesticks many times in my daily analysis but have never explained it properly. Candlestick charts are an option for technical analysis of charts. This option can be found in your internet trading account or sites like on Yahoo! Finance.

Now what makes a Candlestick?
A candlestick of each trading day is formed using 4 prices: Open, Close, High and Low. The Open and Close prices make the body of the candle. The gap between opening and closing prices determines the height of the candle. If the day closes higher than it opened, a white candle is formed. A black candle is formed in the opposite situation. The High price determines the point of the top wick and the Low price determines the point of the leg. For example, a counter opens at $2, hits a low of $1, rises to $5 and closes at $4. A white candle of $2 in height is formed, it has a top wick of $1-high and a $1-long leg.

How to use candlesticks?
Candlesticks can be used to judge market sentiment, giving rise to buy signals or sell signals. This is to put it simply. One of the better free resources that I have found is the Candlestick Trading Forum. Here you can find out what candlesticks mean and much more information on candlestick patterns which I shall not repeat here.

I shall be covering other topics regarding technical analysis and simple techniques that are commonly applied to chart reading. Watch this space!